Royal Mail could be sold off as soon as the end of next year, the Government
has signalled as it published details of biggest privatisation for two
decades.

Under the plans up 90 per cent of Royal Mail’s shares will be sold off, with the remainder being given to postal workers.

Overseas firms would be allowed to buy Royal Mail if a trade sale was preferred to a flotation on the London Stock Exchange, Vince Cable, the Business secretary, said.

The post office network will stay in state hands, and possibly turned into a Co-Op-style mutual organisation, owned by sub-postmasters and members of the public.

Details of the plans were published in the Postal Services Bill, which is expected to become law next summer.

The requirements of the 'universal postal service' – collection and delivery of post six days a week at uniform, affordable prices - have further protected by being written into the Bill. The Government said it had no intention of downgrading them.

The timing would mean that Royal Mail could be sold off by the end of next year at the earliest, although ministers declined to be drawn on specific timings.

Mr Cable said Royal Mail, which employs more than 180,000 postal staff, and the Post Office, which runs the 12,000-strong branch network, were two “cornerstones” of British life, he said.

He said the plans were aimed at securing “vibrant futures” for both, he said, with “substantial investment” needed if the Royal Mail was to modernise at a faster pace and adapt better to the digital age.

Mr Cable said the employee share scheme under which postmen would be handed at least 10 per cent of Royal Mail's shares would be the largest of its kind of any privatisation - bigger than BT, British Gas or British Airways.

He said: “Royal Mail is in a difficult position. My policy is to put them on a stable footing for the future.

"There is no hiding the facts - mail volumes falling, a multibillion-pound pension deficit, less efficiency than its competitors and an urgent need for more capital at a time when there are huge constraints on the public purse.”

Mr Cable said there would be no objection to a foreign-owned group buying the postal organisation if the Government decided to go down the route of a trade sale.

He declined to say how much money the Government hoped to raise through the sale, how much the employee shares will be worth.

The taxpayer will also take direct control of Royal Mail’s pension deficit, currently estimated at around £8billion, said the Government.

The scheme currently has £26 billion of assets and £34 billion of liabilities, so the Government was not acquiring a “gold mine”, said Mr Cable.

He said: “This is an important package. It will secure the services that consumers and businesses rely on.

“It will give employees a stable company to work for, shares in the future of the business and the secure pension they deserve. It will remove the risk to taxpayers of an expensive bail out.”

Mr Cable also disclosed that the Government was considering converting the Post Office arm of the business into a mutual structure in a similar manner to the John Lewis Partnership or the Co-operative Group.

People with an interest in the Post Office would become its members, have a say in appointing the board, agree its long-term strategy and share in its profits.

Handing ownership and running of post offices to employees, sub-postmasters and members of the local community would “empower” the people who knew the business best, said Mr Cable.

Pledging there will be no further closures, he said: “We will break the cycle of declining visitor numbers through new ideas and new services to win back customers. There will be no repeat of the previous Government's closure programmes.”

Postal Services Minister Ed Davey added that Royal Mail was in a “fragile state”, with declining mail volumes which was affecting its finances. He said: “We have to take action - no action is not a feasible way forward.

“It seems to me the Post Office is ideally suited to a John Lewis or Co-operative Group style structure, where employees, sub postmasters and communities get a greater say in how the company is run. This would be the Big Society in action."

The minister, who worked as a consultant advising mail firms around the world before he became an MP, said the UK was well behind the rest of Europe on productivity, with even modern offices using 19-year-old machinery.

It also emerged that Co-operative UK has been asked to explore options for creating a mutualised Post Office, reporting back to the Government in the Spring.

The moves will be fiercely opposed by the Communication Workers Union, which successfully fought plans by the Labour government to part-privatise the postal service last year.

Mr Cable brushed off any concerns. He said: “There is a lot of rhetoric and strong feelings, but we have had a good dialogue with the unions and we think that, when it comes to the crunch, they are realistic. We are confident that the network has a good future.”

The CWU criticised the Government’s “obsession” with privatisation and warned that customers and post offices would suffer.

Billy Hayes, General secretary, said: “The Government has wasted no time in flogging off the country's state assets without exploring other options. This obsession with privatisation is deeply worrying.

“Royal Mail can remain profitable in the public sector under an alternative model.

"If the company has the freedom to borrow money from sources other than Government and the issues of regulation are resolved, then privatisation becomes an unnecessary ideological distraction.”